The American Rescue Plan Act (ARPA) provides $350 B dollars in emergency funding for state, local, territorial, and Tribal governments to remedy this mismatch between rising costs and falling revenues. This includes:
• $195 B for states, (a minimum of $500 M for each State);
• $130 B for local governments (a minimum of $1.25 B per state is provided by the statute inclusive of the amounts allocated to local governments within the state);
• $20 B for tribal governments; and
• $4.5 B for territories.
ARPA provides relief to state, local, and Tribal governments to enable them to address the revenue losses they experienced because of the crisis, help them cover the costs incurred due responding to the public health emergency and provide support for a recovery – including through assistance to households, small businesses and nonprofits, aid to impacted industries, and support for essential workers. It will also provide resources for state, local, and Tribal governments to invest in infrastructure, including water, sewer, and broadband services.
Of the $350 B for local, state, and tribal government ARPA funding, 57 % is allocated to states and 35 % to local governments. States and District of Columbia will gain $195.3 B with $25.5 B equally divided among the states with a state minimum of $500 M and $169 B based on the state share of unemployed workers over a three-month period from October to December 2020. Local Governments will gain $130.2 B divided evenly between non-county municipalities and counties with counties gaining $65.1 B in direct federal aid to all counties based on the county share of the U.S. population based on the most recent data available from the Census Bureau and non-county municipalities gaining $65.1 B with $45.57 B in direct federal aid for municipalities with populations of at least 50,000, using a modified Community Development Block Grant formula, and $19.53 B for municipalities with populations of less than 50,000 based on each jurisdiction’s percentage of the state’s population. Non-direct aid to local governments will be distributed through the states.
Funds may be used to:
- Respond to the public health emergency with respect to COVID-19 or its negative economic impacts, including assistance to households, small businesses and nonprofits, or aid to impacted industries such as tourism, travel and hospitality;
- Provide government services to the extent of the reduction in revenue (i.e. online, property or income tax) due to the public health emergency;
- Make necessary investments in water, sewer, or broadband infrastructure; or
- Premium pay for eligible workers performing essential work (as determined by each state or tribal government) during the pandemic.
States are not allowed to use the funds to either directly or indirectly offset a reduction in the net tax revenue that results from a change in law, regulation or administrative interpretation during the covered period that reduces any tax. No ARPA funds can be deposited into any pension fund, but state and local governments can transfer to a private nonprofit organization, a public benefit corporation involved in the transportation of passengers or cargo, or a special-purpose unit of state or local government.
ARPA requires state and local governments to fulfill reporting requirements. States are required to report how funds are used and how their tax revenue was modified during the time that funds were spent during the covered period (covered period begins on March 3, 2021 and ends on the last day of the fiscal year a state or local government has expended or returned all funds to the U.S. Treasury). Local governments are required to provide “periodic reports” providing a detailed accounting of the use of funds o if a state, county, or municipality does not comply with any provision of this bill, they will be required to repay the U.S. Treasury an equal amount to the funds used in violation. ARPA is being administered by the U.S. Department of the Treasury and the deadline to spend funds is by Dec. 31, 2024. The ARPA payments will be divided into two equal tranches – within 60 days after enactment, the U.S. Treasury is required to release the first tranche allocated to a city, county, or state; the second tranche cannot be released earlier than 12 months after the first payment. To receive a payment either under the first or second tranche, local governments must provide the U.S. Treasury with a certification signed by an authorized officer, and the U.S. Treasury is required to pay the first tranche to counties not later than 60 days after enactment and the second payment no earlier than 12 months after the first payment.
Regulations from the U.S. Treasury are expected soon that may provide new information on specific local, state, and Tribal government uses for the ARPA funds, but this funding represents an unprecedented opportunity to fund small business creation, site development, broadband networks, and other local infrastructure needs.